From Texas, I mostly cover the energy industry and the tycoons who control it. I joined Forbes in 1999 and moved from New York to Houston in 2004. The subjects of my Forbes cover stories have included T. Boone Pickens, Harold Hamm, Aubrey McClendon, Michael Dell, Ross Perot, Exxon, Chevron, Saudi Aramco and more. Follow me on twitter @chrishelman.

Why It's The End Of The Line For Wind Power

It’s the end of the world as we know it. That’s what the U.S. wind power industry is saying to itself these days. And they aren’t talking about some Mayan doomsday nonsense.

On Jan. 1 the federal production tax credit on wind investments expires. For the past 20 years the credit has offset about 30% of the cost of building wind turbines. Add to that the “renewable portfolio standards” for green energy mandated by 29 states, and as a result we’ve seen wind farms spring up across the country. Since 2007 nearly 40% of all the new electricity capacity built in this country has been wind. Wind now generates roughly 3.5% of U.S. electricity.

Don’t expect wind’s share to climb beyond that level any time soon. The end of the tax credit could very well mean the end of the wind industry.

According to the federal Energy Information Administration, the “levelized cost” of new wind power (including capital and operating costs) is 8.2 cents per kWh. Advanced clean-coal plants cost about 11 cents per kWh, the same as nuclear. But advanced natural gas-burning plants come in at just 6.3 cents per kWh.

But it could be getting a lot worse for wind. A fascinating new report by George Taylor and Tom Tanton at the American Tradition Institute called “The Hidden Costs of Wind Electricity” asserts that the cost of wind power is significantly understated by the EIA’s numbers. In fact, says Taylor, generating electricity from wind costs triple what it does from natural gas.

That’s because the numbers from the EIA and wind boosters fail to take into account a host of infrastructure and transmission costs.

First off — the windiest places are more often far away from where electricity is needed most, so the costs of building transmission lines is high. So far many wind projects have been able to patch into existing grid interconnections. But, says Taylor, those opportunities are shrinking, and material expansion of wind would require big power line investments.

Second, the wind doesn’t blow all the time, so power utilities have found that in order to balance out the variable load from wind they have to invest in keeping fossil-fuel-burning plants on standby. When those plants are not running at full capacity they are not as efficient. Most calculations of the cost of wind power do not take into account the costs per kWh of keeping fossil plants on standby or running at reduced loads. But they should, because it is a real cost of adding clean, green, wind power to the grid.

Taylor has crunched the numbers and determined that these elements mean the true cost of wind power is more like double the advertised numbers.

He explains that he started with 8.2 cents per kWh, reflecting total installation costs of $2,000 per kw of capacity. Then backed out an assumed 30-year lifespan for the turbines (optimistic), which increases the cost to 9.3 cents per kwh. Then after backing out the effect of subsidies allowing accelerted depreciation for wind investments you get 10.1 cents. Next, add the costs of keeping gas-fired plants available, but running at reduced capacity, to balance the variable performance of wind — 1.7 cents. Extra fuel for those plants adds another 0.6 cents. Finally, tack on 2.7 cents for new transmission line investments needed to get new wind power to market. The whole shebang adds up to 15 cents per kwh.

Ouch.

As Taylor figures it, natural gas would need to cost upwards of $20 per mmBTU before gas-fired power would cost as much as wind.

Granted, the American Tradition Institute is a right-wing nonprofit that in the past has railed against climate scientists and sought to discredit Global Warming fear mongering. That doesn’t mean Taylor’s calculations are wrong, just that everyone on the pro-wind side ought to read the report and chime in with their critiques.

The American Wind Energy Association says that the wind sector employs 37,000 and boasts 500 factories building components. Even with new anti-dumping tariffs on Chinese makers of wind turbines, the AWEA says that if Congress fails to extend the production tax credit for wind, many of those jobs could be eliminated and factories closed in early 2013. That’s how important these tax credits are to wind’s viability.

Taylor and Tanton figure that at the current price of natural gas, and before counting any subsidies or transmission costs, ratepayers are paying about $8.5 billion more this year for electricity from wind than they would have paid if it were gas-fired power. That amount doesn’t even include the cost of the direct federal subsidies.

What’s more, ratepayers will have to shoulder that cost for as long as the turbines are in operation. That’s $8.5 billion a year that ratepayers are forking over to subsidize a less efficient, more expensive technology; $8.5 billion that could otherwise be invested in natural gas electricity, or better yet, nuclear.

Just think, in South Carolina, power company Scana and its partners are investing about $11 billion to construct two 1,100 mw nuclear reactors on roughly 1,000 acres. To get the same amount of electricity out of wind (remember that turbines operate at an average of less than 50% capacity because of wind’s intermittancy) and you’d need more than 1,700 turbines stretched across 200,000 acres, for an upfront investment of $8.8 billion. The nukes might cost more upfront, but they last longer, they provide reliable base load power and they emit zero carbon.

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Point but comparing one bad idea with another doesn’t really work . Late president Nixon wanted lots of jobs in his district and that why we have the nuclear problems of today when its realized the size of the elephant ( nuclear waste ( lots more jobs ask Los Alamos ) we have created. Oak Ridge ran a reactor ( Thorium LIFTER http://smartenergyportal.net/article/nuclear-power-option-makes-sense ) and switched it of on Friday and turned it back on again on Monday that practically ran itself but it was ignored because the job numbers didn’t work for the Pols . Also Carlsbad is strictly low level stuff ( Gloves debris etc ) and thats a great ( pun ) jobs industry sorting it out at LANL. Lets not do the same thing again with another industry innovation

There is an unusual word called National Sacrifice Areas in many uranium extracting countries which means dead areas containing radioactive leftover and debris which cannot be used for any purpose by mankind but has to be kept as a terror to all coming generations, a prick on the conscience of that nation. It was in 1972 that in America, President Richard Nixon first used this word to describe certain vast stretches of land with radioactive contamination which won’t go away for several centuries. To produce one tonne of industrial uranium, generally more than 10,000 tonnes of ore have to be extracted from a mining area because the concentration of uranium in the ore would most often be 0.01 to at the most 0.1 percent. This results in the leaving behind of 10,000s of times of the volume of the actual industry grade production, along with exposed and scattered mountains of rocks of low uranium content. Countries with uranium extraction have many such abominable black deserts which appear nowhere in the maps of those countries. These black holes remain there a death ground for the people even after advocates and apostles of nuclear energy are long dead and gone. To store and guard these debris mountains, huge corporations are soon to appear on this world, the fortune 5000 companies of the future world. Most often, these radioactive debris mountains cannot be kept in those original sites but will have to be moved to other sparable sites which will need billions and billions of pounds. America and Germany have had to spend unbelievable huge amounts for such tasks. The large uranium extraction companies make their fortune and move out. People spend billions more out of public treasury through government for ensuring a false feeling of safety by relocating or guarding this debris. Adolph Hitler was an angel when compared to the proponents of nuclear energy. Supply and demand for uranium in the world does not match. During the past many years, stockpiles of uranium had been growing and, when compared to the number of nuclear plants operating, there were considered to have been existing some surplus. Only 5 years into the 21st century, numerous new power plants were built and the demand exceeded supply which was temporarily met from military reserves. Logically, to cater to the increasing number of power plants, quite a number of uranium mines have to be opened worldwide or new uranium-rich planets and dead stars will have to be discovered and exploited. There is not one unmapped uranium spot in this world. All rich uranium sites were the first to be touched which have all exhausted already. The ones intended to be opened newly will have very low uranium content certainly which only means the quantity and number of radioactive debris mountains and National Sacrifice Areas in the world are going to increase at astronomical rates.

The energy sector is highly subsidized in every sector. Renewable’s are like the space program, with numerous technological benefits.

The distributed power generation model will be the world’s model. we can have the common sense to follow suit, or we can continue to rely mostly on large power plants, with less redundancy and the environmental problems they cause.

Nice Jeff from our end ( Re-Insurance – Best Practices ) we see the growth of smart DC devices ( Like your cell phone but running lights , heating etc ) Growing very fast from ( 2012 = 15 – 20% of household – business devices to 75% – 85% in the next 10 years using small lithium power sources ) That uses only 10-15% of current ( my pun ) AC power systems load ( Very bad for utilities ) that will change the dynamics once again. ( Ikea has been testing fuel cell and lithium energy efficient refrigerators and more ( easy one ) for some time and thats the way all devices will go. No household , building electrical wires just power ( smart DC ) over Ethernet put them ( Refrigerator Stove Microwave Lights Washing Machine anywhere. You can guess which trade industries hate this

The industry ( and country focus should be ) . How do we get more electrons to the end users and improve the quality of life ( of everyone ) without destroying the environment in the process and without bankrupting them .